TIDMJDW
RNS Number : 3885L
Wetherspoon (JD) PLC
29 April 2020
The following amendment has been made to the 'Further Covid-19
Update and Equity Placing' announcement released on 29 April 2020
at 16:45 under RNS No 3800L.
PDF of full announcement text including tables are now shown
below.
All other details remain unchanged.
The full amended text is shown below.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3885L_1-2020-4-29.pdf
THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR RELEASE,
PUBLICATION, DISTRIBUTION OR FORWARDING, IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA,
CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY OTHER
JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION
WOULD BE UNLAWFUL.
FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND
IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
LEI: 213800CHWARFAAN7UB85
For immediate release
29 April 2020
JD Wetherspoon plc ("the company")
Further Covid--19 Update, Equity Placing
The company's immediate priority is to manage the business
during the current 'lockdown' period. It is also starting to plan
for a reopening of pubs and hotels in or around June.
The company's long-stated "mission" is to have well trained
staff, offering excellent products, at reasonable prices, in
individually designed and well-maintained pubs.
Investec Bank plc ("Investec") is acting as sole bookrunner in
connection with the equity placing.
Current Trading
In its interim results announcement for the six months ended 26
January 2020, released on 20 March 2020, the company announced
revenue of GBP933.0m (up 4.9%), like-for-like sales up 5.0%, profit
before tax of GBP57.9m (up 15.2%), earnings per share (including
shares held in trust) of 43.3p (up 15.8%) and free cash flow per
share of 46.7p (down 31.2%).
In the six weeks to 8 March 2020, like-for-like sales increased
by 3.2%.
In the week to 15 March 2020, like-for-like sales declined by
4.5%. The Prime Minister advised customers to avoid restaurants,
bars, pubs and clubs on 16 March 2020.
The UK government ordered the closure of pubs on 20 March 2020,
from which point the company's sales have been zero.
Management Actions
The company has implemented an extensive set of measures to
protect profit and cash. These include:
- Operational reductions. The company closed its pubs and
hotels, putting them, in effect, into 'hibernation' in which
ongoing costs, for example utilities, are minimised.
- Opening programme. This has been stopped and is not expected
to restart until FY22, from which point the company intends to open
approximately five pubs each year.
- Labour costs. Around 43,000 employees, more than 99% of the workforce, have been furloughed.
On average, the company is paying 80% of pre-lockdown pay
levels; the cost to the company of additional 'top-up' payments is
approximately GBP0.6 million per month.
To date, there has been no headcount reduction, although that
will remain under review.
- Suppliers. The company paid suppliers due at the end of March
2020. The majority, comprising 83% of suppliers, have now been paid
in full. Extended payment terms have been agreed with a number of
larger suppliers.
- Board salary reductions. The board has volunteered to take the
following reductions: Tim Martin - 50%; John Hutson - 50%; Ben
Whitley 38%; Su Cacioppo - 42%; each of the non-executive directors
- 50%.
- Rents. The majority of rental payments due in March, other
than some concessions, have been deferred.
The company has agreed extended payment terms with many
landlords.
- Rates. The government has said that business rates will not be
payable from April 2020 to March 2021, resulting in a cash saving
of approximately GBP60 million for that period.
- Repairs and maintenance. Reduced from an annualised run rate
of GBP83 million to GBP10 million during closure.
- Overheads. Overhead expenditure (e.g. utilities, distribution
centre costs, HQ running costs, IT) has been reduced from an
annualised run rate of GBP210 million to approximately GBP35
million.
- Capital Expenditure. Up to the point when pubs closed, GBP34
million had been spent in the second half year on new pubs,
freehold reversions and reinvestment.
GBP70 million of additional capital expenditure, planned for the
rest of the second half of the financial year, has been
deferred.
- Taxation. In general, the government and HMRC have been
helpful in agreeing delays in payments of tax. Just under GBP20
million of PAYE and VAT payments have been deferred. It is
anticipated that an additional GBP40 million of PAYE, VAT and
(fruit/slot) machine gaming duty, due after the pub closure, will
also be deferred.
- Dividend. As previously announced, the interim dividend has been cancelled.
The income statement costs that are payable during the closure
period total about GBP3 million per month, the majority of which
relates to loan interest and 'top-up' payments, so that employees
receive 80% of their pre-closure income. All other costs are either
variable, and have been reduced to nil, have been deferred until
after pubs reopen, or were paid in advance of the closure period.
Some costs, such as insurance, broadband and IT software, were paid
before the pubs closed on 20 March 2020.
UK Government actions
Since pubs closed, HM Treasury has announced a package of
temporary measures to support public services, people and
businesses through the period of disruption. These include the
Coronavirus Job Retention Scheme ("CJRS"), deferred VAT payments
and business rate payment holidays.
The company expects to be eligible for a loan of up to GBP50
million under the new Coronavirus Large Business Interruption Loan
Scheme ("CLBILS"), as updated by the Chancellor of the Exchequer on
16 April 2020. The company will consider making an application
under this scheme in due course.
As regards the COVID Corporate Financing Facility ("CCFF"), the
company has made enquiries, but does not believe it is eligible,
since it is not 'investment grade'. The company is regarded as
investment grade by its two 'lead banks' and by its USPP lender,
and is charged investment grade rates, we understand.
Financing arrangements
As at 22 March 2020, the company had net debt, including bank
borrowings and finance leases, but excluding derivatives, of GBP836
million, compared to GBP804.5 million at 26 January 2020. This
resulted in leverage of approximately 3.85 net debt / EBITDA,
calculated over the previous 12 months.
The board believes that no covenants are expected to be breached
in the short term, with certain costs being treated as exceptional
during the Covid-19 pandemic.
However, as a precaution, the board requested, and has received,
signed covenant waivers for the quarters ending April and July
2020. The Bank of England has said that banks should waive covenant
breaches that stem from the Covid-19 crisis and the company
believes that further waivers should be forthcoming, if
required.
The company has fully drawn down its revolving credit
facility.
As previously stated, it is the company's intention that the
maximum net-debt-to-EBITDA ratio should be around 3.5 times, other
than in the short term.
The ratio has risen, as a result of the temporary closure of
pubs, and the company intends to reduce the level in a timely
manner.
The company has previously stated that debt levels of between 0
and 2 times EBITDA are a sensible long-term benchmark, although
higher levels may be justified at times of very low interest
rates.
Property
As at 26 January 2020, the company had 874 pubs capable of being
open, absent current restrictions.
10 years ago, the company's freehold/leasehold split was
41.3%/58.7%. As at 26 January 2020, as a result of investment in
freehold reversions (relating to pubs where the company was
previously a tenant) and freehold pub openings, the split was
63.6%/36.4%.
As at 26 January 2020, the net book value of the property, plant
and equipment of the company was GBP1.45 billion, which included
GBP1.05 billion of freehold and long leasehold property. The
properties have not been revalued since 1999.
UK taxes and regulations
In the six months ended 26 January 2020, taxes paid by the
company totalled GBP402.7 million (including VAT, excise duty,
PAYE, climate change levy etc.), equating to GBP462,000 tax per pub
or 43.2% of the company's sales. In comparison, the company's
profit after tax as a percentage of sales was 4.9%.
As a result of a reduction in profit expectations, a refund of
corporation tax of approximately GBP10.5 million has been
received.
Non-recurring items
Exceptional costs of GBP15.9 million were incurred in the first
half. GBP9.5 million related to impairment of IT assets and GBP6.4
million to property charges. These exceptional costs gave rise to a
cash inflow of GBP2m from property sales.
Further exceptional costs are likely to be incurred during the
second half of the financial year. These are expected to comprise
income statement costs as a result of the closure period and a
small amount of stock write-offs.
Dividends
In the current circumstances, the board does not intend to
propose a final dividend for the year ending 26 July 2020, when the
full year results are announced in September 2020.
Outlook
The duration of the Covid--19 impact is uncertain at this stage,
as are its consequences for the financial performance for the full
year. The company does not intend to issue a trading update on the
previously indicated date of 13 May 2020.
The company's current assumptions are that its pubs will remain
closed until late June 2020.
During the closure period, the company have deferred or reduced
as many costs as possible, until after reopening - for example,
rent, utilities and repairs. The 'cash burn', or actual cash spent,
during this period (excluding payments to suppliers) is estimated
at GBP3 million per month. However, assuming the pubs were to be
closed for a longer than anticipated period, the cash burn would
increase to around GBP11 million per month, as a result of the
inclusion of costs such as rent, national distribution centre
overheads and IT contracts. These estimates exclude historic
creditors, including suppliers and HMRC. The company estimates that
it has sufficient liquidity until the end of November 2020.
Once pubs reopen, there will be a working capital inflow. Trade
creditors at the balance sheet date of 26 January were GBP316
million, compared to GBP308 million at the previous year end (28
July 2019) and GBP321 million at the previous half year end (27
January 2019)*.
*Source: interim report 2020, page 36, note 20.
The company is likely to make some changes to its operating
model, assuming increased social distancing, and anticipates a
gradual recovery in customer numbers.
Wetherspoon pubs are substantially larger than average, and most
have outside facilities. The company believes these factors are
likely to assist if social distancing measures apply.
The company has traded well during previous recessions, in the
last 40 years. Competitive pricing may have been an important
factor. Sales have increased by around GBP1 billion since 2008, the
approximate start of the last recession.
Scenario Analysis
The principal assumption is that like-for-like sales will be
minus 10% for the first month after reopening, increasing by 2% per
month, and levelling out at +3%. Sales were about +5% in the 18
months before closure, therefore it is assumed that initial sales
will be about 15% below pre-closure levels.
The company has a history of making a large number of small
changes to its operations that, over time, has led to sales per pub
per week increasing substantially, and intends to utilise a similar
approach after reopening.
If correct, the above estimates would result in a total sales
decline in the year ending July 2020 of 26%, incorporating the
closure period.
On the basis of these estimates, with LFL sales reaching +3%,
about 7 months after reopening, the financial performance for 2021
and 2022 could be as follows:
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3885L_1-2020-4-29.pdf
The figures above are pre IFRS16 and exclude the net benefit of
the Equity Placing and Subscription.
(1) Zero business rates for the first three quarters of FY21
will benefit profits.
(2) As in the 2008 to 2010 financial years, a reduction in
reinvestment is anticipated, to 2% of sales, from around 4% of
sales. This will increase free cash flow, but will have a
negligible effect on profits.
Effect of larger sales decline
In the event of LFL sales falling by 25% (that is approximately
30% less than pre-closure levels) for the first 7 months after
reopening, and then increasing by 3% per month from those low
levels, the financial performance for 2021 and 2022 could be as
follows:
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3885L_1-2020-4-29.pdf
The figures above are pre IFRS16 and exclude the net benefit of
the Equity Placing and Subscription.
* If sales on reopening are -25%, the company plans to introduce
a series of measures to reduce costs, including lower staff
bonuses, the benefit of which would flow through into 2022. These
initiatives would be temporary, but would produce unusually high
profits in 2022.
General comment on low sales on reopening
The company believes it would be cash flow neutral at minus 50%
like-for-like sales, and that it would generate positive cash flow
at sales above those levels. The company's average weekly sales per
pub are significantly larger than those of other large managed
house pub companys, which creates some scope for profits at reduced
sales levels.
Clearly the duration of Covid-19's impact, including on the UK
hospitality sector is very uncertain at this stage as are its
consequences for the company's financial performance for the
current financial year and beyond. Accordingly, no assurance can be
given that any particular assumptions will prove correct or
predictions or modelled scenarios will result.
The outlook is taken from the company's assessment of the
knowledge and information it currently has available, and reliance
must not be placed on any forward-looking statements - please see
the cautionary statement below.
Equity Placing
The company has taken decisive action to preserve cash and
ensure sufficient liquidity.
The company has separately announced today an intention to
conduct a non--pre--emptive placing of new ordinary shares of
GBP0.02 each in the capital of the company representing up to 15%
of the company's existing issued ordinary share capital (the
"equity placing"). The placing is expected to raise GBP141m.
Directors and members of the senior management team including
John Hutson, CEO, Ben Whitley, Finance Director, and Tim Martin,
founder and Chairman will participate alongside the equity placing,
in a separate subscription with the company (the "subscription"),
and intend to contribute GBP300,000.00. The equity placing and
subscription are not being underwritten.
The net proceeds of the equity placing will be used to
strengthen the company's balance sheet, working capital and
liquidity position during the period of disruption.
Based on the 'scenario planning' undertaken, the additional
capital will provide sufficient liquidity to deal with very low
sales after reopening, helping the company to return to growth as
the market normalises.
The board has concluded that the equity placing is in the best
interests of shareholders; a conclusion endorsed in the course of
recent shareholder consultation.
The placing structure minimises cost and time to completion at
an important time for the company.
Commenting on this announcement, Tim Martin, chairman of
Wetherspoon, said:
"The Covid--19 outbreak is having a severe impact on the UK pub
sector. In these challenging times I would like to thank everyone
at the company, its suppliers, landlords, banks and the government
for their support and commitment. We've had to take significant
action to reduce costs, decisions which have not been taken
lightly. We look forward to re--opening our pubs and hotels and
welcoming back our teams in the near future.
As a result of the actions taken, the cooperation of many
stakeholders, and the equity placing announced today, we will be
well positioned to reopen our pubs and to return to growth, as the
market recovers."
This announcement is released by J D Wetherspoon plc and
contains inside information for the purposes of Article 7 of the
Market Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in
accordance with the company's obligations under Article 17 of
MAR.
J D Wetherspoon plc
John Hutson , Chief Executive Officer
Ben Whitley, Finance Director
(please address all enquiries
to Alex Bull (email: abull@jdwetherspoon.co.uk
or 07770 966 923)
Investec Bank plc - Sole Financial Adviser, Tel: +44 (0)20 7597
Sole Broker, Sole Global Coordinator & Sole 5970
Bookrunner
Christopher Baird, David Flin, Tejas Padalkar
NOTES TO EDITORS
1. J D Wetherspoon owns and operates pubs throughout the UK and
Ireland. The company aims to provide customers with good-quality
food and drink, served by well-trained and friendly staff, at
reasonable prices. The pubs are individually designed and the
company aims to maintain them in excellent condition.
2. Visit our website www.jdwetherspoon.com .
3. The annual report and financial statements 2019 has been
published on the company's website on 13 September 2019.
4. The current financial year comprises 52 trading weeks to 26
July 2020. The Trading Update previously scheduled for 13 May 2020
will no longer be issued.
5. For the purposes of MAR and Article 2 of Commission
Implementing Regulation (EU) 2016/1055, the person responsible for
releasing this announcement is Ben Whitley, Finance Director.
CAUTIONARY STATEMENT
This COVID--19 Update (the "report") has been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the UK Financial Conduct Authority and is not audited. No
representation or warranty, express or implied, is or will be made
in relation to the accuracy, fairness or completeness of the
information or opinions contained in this report. Statements in
this report reflect the knowledge and information available at the
time of its preparation.
A variety of factors may cause the company's actual results to
differ materially from the forward--looking statements contained in
this report. Certain statements included or incorporated by
reference within this report constitute "forward-looking
statements" in respect of the company's operations, performance,
prospects and/or financial condition. These forward--looking
statements may be identified by the use of forward--looking
terminology, including the terms "believes", "estimates", "plans",
"anticipates, "expects", "intends", "may", "will", or "could" or
words of similar substance or the negative thereof, or by
discussions of strategy, plans, objectives, goals, economic
performance, dividend policy, future events or intentions. By their
nature, forward-looking statements involve a number of risks,
uncertainties and assumptions because they relate to events and
depend on circumstances that may or may not occur in the future or
are beyond the company's control. Actual results or events may and
often do differ materially from those expressed or implied by those
statements. Any forward--looking statements reflect the
company's current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the company's business,
results of operations, financial position, liquidity, prospects,
growth and strategies. Forward--looking statements speak only as of
the date they are made. The company's actual operating results and
financial condition and the development of the industry in which it
operates may differ materially from the impression created by the
forward--looking statements contained in this announcement.
Important factors that could cause these differences include, but
are not limited to, the ongoing national and international impact
of the COVID-19 pandemic, general economic and business conditions,
industry trends, foreign currency rate fluctuations, competition,
changes in government and other regulation, including in relation
to the environment, health and safety and taxation, labour
relations and work stoppages, changes in political and economic
stability and changes in business strategy or development plans and
other risks.
Accordingly, no assurance can be given that any particular
expectation will be met and reliance shall not be placed on any
forward-looking statement. Additionally, forward-looking statements
regarding past trends or activities shall not be taken as a
representation that such trends or activities will continue in the
future. The information contained in this report is subject to
change without notice and no responsibility or obligation is
accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise.
In particular, no statement in this report is intended to be a
profit forecast and no statement of a financial metric (including
estimates of EBITDA, profit before tax, free cash flow or net debt)
should be interpreted to mean that any financial metric for the
current or future financial years would necessarily match or exceed
the historical published position of the company. The estimates set
out in the report have been prepared based on numerous assumptions
and forecasts, including those set out in this report, some of
which are outside of the company's influence and/or control, and is
therefore inherently uncertain and there can be no guarantee or
assurance that it will be correct. The estimates have not been
audited, reviewed, verified or subject to any procedures by our
auditors. You should not place undue reliance on them and there can
be no guarantee or assurance that they will be correct.
This report does not constitute or form part of any offer or
invitation to sell, or any solicitation of any offer to purchase or
subscribe for any shares in the company, nor shall it or any part
of it or the fact of its distribution form the basis of, or be
relied on in connection with, any contract or commitment or
investment decisions relating thereto, nor does it constitute a
recommendation regarding the shares of the company or any
invitation or inducement to engage in investment activity under
section 21 of the Financial Services and Markets Act 2000. Past
performance cannot be relied upon as a guide to future performance.
Liability arising from anything in this report shall be governed by
English Law, and neither the company nor any of its affiliates,
advisors or representatives shall have any liability whatsoever (in
negligence or otherwise) for any loss howsoever arising from any
use of this report or its contents or otherwise arising in
connection with this report. Nothing in this report shall exclude
any liability under applicable laws that cannot be excluded in
accordance with such laws.
This announcement has been issued by, and is the sole
responsibility, of the company. No representation or warranty
express or implied, is or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by
Investec or by any of its affiliates, agents, directors, officers,
employees, advisers or anyone acting on their behalf ("affiliates")
as to or in relation to, the accuracy or completeness of this
announcement or any other written or oral information made
available to or publicly available to any interested party or its
advisers, and any liability therefore is expressly disclaimed.
This announcement is for information only and does not itself
constitute or form part of an offer to sell or issue or the
solicitation of an offer to buy or subscribe for securities
referred to herein in any jurisdiction including, without
limitation, the United States or any restricted territory (as
defined below) or in any jurisdiction where such offer or
solicitation is unlawful.
This announcement, and the information contained herein, is not
for release, publication or distribution, directly or indirectly,
to persons in the United States, Australia, Canada, the Republic of
South Africa or Japan or in any jurisdiction in which such
publication or distribution is unlawful (each a "restricted
territory"). The distribution of this announcement and the placing
and/or the offer or sale of the placing shares in certain
jurisdictions may be restricted by law. No action has been taken by
the company, Investec, any of their respective affiliates or any
person acting on its or their behalf which would permit an offer of
the placing shares or possession or distribution of this
announcement or any other offering or publicity material relating
to such placing shares in any jurisdiction where action for that
purpose is required. Persons distributing any part of this
announcement must satisfy themselves that it is lawful to do
so.
Investec is acting exclusively for the company and no-one else
in connection with the placing and are not, and will not be,
responsible to anyone (including the placees) other than the
company for providing the protections afforded to their clients nor
for providing advice in relation to the placing and/or any other
matter referred to in this announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDKKCBDABKDPQB
(END) Dow Jones Newswires
April 29, 2020 12:30 ET (16:30 GMT)
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